Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Can you explain these graphs
![Corporate Taxes
TE (= kE)
Cost of
capital
(r = k =
WACC)
rA(= kv)
r= WACC
ro(= kp)
D/E-ratio](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad6d3522-58fe-4a42-a237-8062bf310251%2Ffe7fdd97-3659-48fc-a592-d1d4255ffb2c%2Fldbw3y_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Corporate Taxes
TE (= kE)
Cost of
capital
(r = k =
WACC)
rA(= kv)
r= WACC
ro(= kp)
D/E-ratio
![Exhibit 13.4 WACC, Cost of Equity and Cost of Debt vs. D/E with No Taxes
Ivo Technologies
Return
Cost of equity
after repurchase
14.8% WACC before
repurchase
WACC after
repurchase
11.2%
WACC
4%
ro
D/E
0.5](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad6d3522-58fe-4a42-a237-8062bf310251%2Ffe7fdd97-3659-48fc-a592-d1d4255ffb2c%2Fharalcg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exhibit 13.4 WACC, Cost of Equity and Cost of Debt vs. D/E with No Taxes
Ivo Technologies
Return
Cost of equity
after repurchase
14.8% WACC before
repurchase
WACC after
repurchase
11.2%
WACC
4%
ro
D/E
0.5
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